Kenneth Fletcher and Todd Jacobson
WC Monitor
3/13/2015

The appointment of former Deputy Secretary of Energy Dan Poneman as the new President and CEO of uranium enrichment firm Centrus Energy Corp. is causing concern among some on Capitol Hill. During Poneman’s tenure at DOE, the Department played a big role in plans by the company, then known as USEC, for the future deployment of the American Centrifuge technology.  “Under Mr. Poneman, the Department of Energy gave away significant quantities of publicly-owned uranium for the benefit of USEC,” Sen. John Barrasso (R-Wyo.) said in a March 12 letter to Secretary of Energy Ernest Moniz. “Centrus’ announcement epitomizes the inappropriate and legally questionable relationship that DOE has had with this private company.”

Rep. Cynthia Lummis (R-Wyo.) also vowed to push DOE on Poneman’s move, noting the support USEC  received from DOE. “I find it very troubling to see that someone so close to the top of the DOE involved in distributing these resources has found his way to that same company,” Lummis said in a statement. “As Chairman of the Oversight and Government Reform Subcommittee on the Interior, I will investigate the DOE and Centrus’ activities leading up to now former Deputy Energy Secretary Dan Poneman’s hiring as CEO of Centrus.” In the Senate, Energy and Water Appropriations Subcommittee Chair Lamar Alexander (R-Tenn.) has “asked for additional information from the U.S. Department of Energy” on Poneman’s new position, according to an Alexander spokesman.

Barred from DOE Talks for Two Years

Centrus took issue with the questions Barrasso raised surrounding Poneman’s appointment. “Poneman has stated repeatedly that he and the company will fully comply with all applicable post-employment restrictions and government ethics requirements,” Centrus spokesman Jeremy Derryberry said. “This will not be an issue; he was not hired to conduct government relations. He was hired to lead Centrus as it rebuilds its business of delivering nuclear fuel to reactors in the United States and internationally.”

As part of the restrictions holding over from his DOE post, Poneman will be barred for two years on interacting with DOE. Poneman stepped down as Deputy Energy Secretary in October and will not be able to discuss with Department officials a DOE program maintaining the American Centrifuge. “His only restrictions are at DOE. That doesn’t limit him to talking to customers or suppliers or employees,” Centrus spokesman Jeremy Derryberry told WC Monitor this week. “The CEO has a much larger role as far as running the business. Speaking to DOE about one thing is not his primary concern right now.”

When asked for comment, a DOE spokesperson said in a statement: “Former Deputy Secretary Poneman, like all other former Executive Branch employees, is subject to many post-employment restrictions.  He received advice about those restrictions before taking the position with Centrus.”

Poneman’s five-year tenure at the Department came as DOE provided around $260 million in support of the American Centrifuge technology as part of a cost-share RD&D program, which in addition to Congressional appropriations was funded in part by a $44 million swap in which DOE took on USEC uranium tails liability. Additionally, DOE offered the company a lifeline in the form of the transfer of a large quantity of uranium tails to utilities to extend operations at USEC’s Paducah Gaseous Diffusion Plant.

Poneman to Earn $1.38 Million in First Year

Poneman will earn about $1.38 million in his first year at Centrus Energy, according to a filing this week with the Securities and Exchange Commission. That includes a base salary of $750,000 and an annual bonus for Fiscal Year 2015 fixed at $625,000. In subsequent years, that bonus could reach 125 percent of the base salary. Additionally, he will receive a stock option of 300,000 shares of Centrus stock and could also earn an incentive award of $350,000 in June 2016 if the company meets performance milestones.

Centrus: Talks With Poneman Began After He Left DOE

Talks with Centrus about the post did not begin until after Poneman stepped down in October, according to the company, the same month former Centrus CEO John Welch resigned after the company wrapped up a Chapter 11 bankruptcy restructuring. “At no time was Dan Poneman approached during his years in government about a position with Centrus or USEC,” Derryberry said in a written response. “I don’t have an exact date for our first contact, but as you know, our search committee took six months to first identify potential candidates and then narrow in on his selection and recruitment.” Poneman will “fully comply with all applicable restrictions and government ethics requirements,” he said.

Poneman: U.S. Objective Was ‘To Sustain a Domestic Capability’

In the past, DOE officials, including Poneman, have linked government funding for American Centrifuge to the need for a domestic enrichment capacity for both national security requirements, such as tritium production, and energy security. “I think there is a common misperception that the U.S. was trying to prop up a specific company. That was never, as far as I knew, the U.S. objective,” Poneman said last year in an exit interview with WC Monitor. “The U.S. objective has been to sustain a domestic capability. It happens to be that the indigenous technology that we had to pursue was the American Centrifuge Project and happens that USEC was the company that was pursuing that capability. But the objective from a U.S. strategic standpoint was in sustaining and developing that technology and that option.”

Centrus does not currently enrich uranium and its main source of revenue is brokering Russian low enriched uranium through a supply agreement with Tenex. The company hopes to commercialize the American Centrifuge plant in the future, but Centrus has acknowledged the market doesn’t support the project right now. The firm is currently maintaining the American Centrifuge technology for DOE under a subcontract with Oak Ridge National Laboratory, and has suggested DOE could support the technology before it becomes commercially viable by building a “national security train” of centrifuges to cover national security needs.

Eventually the company may again seek a DOE loan guarantee, which was put on hold after the firm struggled to gain approval of its initial application. “When the commercial market is there we’ll go back for financing, a loan guarantee will probably be part of that package, but that’s something we’ll assess at that point in time,” Derryberry said. “Right now the application has been deferred; no action is being taken on it and we are not pushing DOE to take any action on it right now.”

Any discussions with DOE in the next year-and-a-half would be led by someone other than Poneman, Derryberry said, but he added that person hasn’t been identified yet. In the meantime, Centrus sees Poneman’s appointment as a major asset for the company. “He joined because he sees this as a commercial opportunity. In selecting him the Board saw him as an internationally recognized leader in nuclear power and they thought that was critical in expanding our commercial enterprise going forward,” Derryberry said. “Our customers said they want a U.S. source of enrichment and Dan himself has said for many years that an American enrichment is essential to national security and energy security. He said unequivocally that he thinks that ACP is well positioned to be that source.”

Regarding concerns from the Wyoming delegation, Derryberry said the company’s success would also benefit the uranium mining industry. “Dan Poneman is here to make Centrus a commercial success, and a successful Centrus supports the entire U.S. nuclear fuel cycle, including U.S. uranium miners,” he said. “We all have a common interest in enhancing the role that U.S. companies play in fueling the growth of nuclear power around the world. Such growth is good for energy security and the environment and will provide many economic benefits and jobs across the country. We need to reverse the shrinking role of U.S. nuclear fuel cycle suppliers in the world market by preserving all our indigenous capabilities, and that’s part of Poneman’s mission as he assumes his new role.”

Poneman Hire ‘Exposes Limitations’ in Ethics Rules, Activist Says

However, some advocacy groups have echoed lawmakers’ concerns about Poneman’s position. “It’s problematic that a company with a business model oriented toward government subsidies and loans and contracts hires as its new CEO a former high ranking government official,” Tyson Slocum,  director of Public Citizen’s energy program, told WC Monitor, adding “I think that current ethics laws weren’t really written for this extremely unique situation.”

Slocum explained: “He’s extremely valuable. You don’t need to have a direct contract. Every single employee in the company reports to the CEO. He can be intimately involved in marshalling the resources of his company and have others make contacts using his Rolodex and his name. That’s why I said this is such a unique example that exposes limitations in the current ethics rules.”